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The Moneyist: ‘We’ve been left out in the cold’: My mother named my sister beneficiary of her estate, but wrote a letter wishing to divide it among her 3 children. What now?

Dear Quentin,

My mother passed away recently. She had bank and investment accounts and a good deal of land that had one of my siblings as a joint owner (not just an authorized signer). In the last decade of her life, mom had given this same sibling her financial power of attorney, and their spouse medical power of attorney. The land had a “transfer on death” completed five years ago that lists an order of succession — my sibling, their spouse, then me. Mom had no debts.

My question is whether or not, given the joint ownership and the TOD with my sibling, there is anything from my mom’s estate that will be divided between me and mom’s other remaining children (there are three of us). My sibling who is the owner of the accounts has said there is no will and no trust; conversations with my mother prior to her death seem to confirm this. Has everything just been left to one sibling, while the other two of us were left out? 

There is a house on the land — does that and everything in it go to my sibling based on the “transfer on death” deed? What about the bank and investment accounts? In a letter to all of her children several years ago, mom specifically indicated that she wanted portions of the land signed over to the remaining children within a few years. We’re left out in the cold. How do I know if that will happen?

Do we have any recourse?

Left Out

Dear Left Out,

Your mother seemed to be confused or conflicted about her intentions: arranging a transfer-on-death deed for some of her assets, and writing a letter expressing her wish to divide her real estate among her kids. Sometimes parents leave too much up to the kindness and/or trustworthiness of their children, not realizing that they have not left their estate in safe hands or properly stated how it should be divided. That could work to your advantage here, or not.

The law pertaining to transfer-on-death deeds varies by state. The District of Columbia allows such deeds to be used for real estate. Michigan and New York, among other states, do not. In Michigan, Florida and Texas, a “lady bird deed” is similar, allowing people to transfer the assets to a beneficiary upon their death, while avoiding probate and allowing the beneficiary to live in the property for their lifetime. It can be useful in some states for those who wish to qualify for Medicaid.

It’s not clear from your letter how much of your mother’s estate was included in the transfer-on-death deed, and how much of it was eligible for such a transfer. Again, it depends on where you live and the deed itself. Whatever remains of her probated estate, assuming she did not leave a will, should be divided by the probate court in accordance with the state law. Assuming your father has passed on, her direct descendants would be her three children. 

If your sister was a co-owner rather than a co-signer of your mother’s bank accounts, she will likely inherit those accounts upon her death. I am reminded of a letter I received last year from a woman who was made co-owner of her mother’s bank accounts, and wondered whether she had an obligation to tell her sisters after their mother’s death. I told her that yes, transparency is always the preferred option, but I also wondered whether her mother fully understood the arrangement.

Another possible wrench: The kind of the deed on the land on which your sister is listed will determine whether or not she automatically inherits it. Firstly, a transfer-on-death deed is usually only valid if it was recorded properly with the county clerk or recorder’s office. Given what you have told me, it would be folly to assume that was done properly. Secondly, for tenancy in common, a co-owner can bequeath anyone their share and/or simply allow it to go through probate.

So where does all this leave you? It would be wise to consult an estate attorney. I don’t know your family’s history, but leaving her entire estate to one child would be relatively rare. Your sister’s power of attorney lasts only for the duration of your mother’s lifetime. If there is no will, you could petition the probate court to become administrator of your late mother’s estate so you have a seat at the table. At the very least, appoint an independent third party to oversee the process.

This story has three hard-won lessons. For elderly parents: Always be clear about your intentions. It’s too late for that now in your case, of course. For the beneficiaries: Never assume that everything has been settled correctly, and the word of one family member is gospel. Act now before the probate is completed, the estate is wrapped up and — crucially — the statute of limitations for contesting the estate settlement has expired.

And finally: A power of attorney has a fiduciary duty to act in good faith and in the best interests of the other person, in this case your late mother. In most states, a power of attorney who wishes to transfer assets to his/herself must have those terms spelled out clearly in the original power of attorney document to avoid self-dealing. It may (or may not) be that your sister breached her fiduciary duty in this case. Your attorney will no doubt wish to look into that too.

Yocan email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

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More from Quentin Fottrell:

• ‘I’ve felt like an outsider my whole life’: My father died without a will, leaving behind my stepmother and her 4 children. Do I have any rights to his estate?
• ‘He was infatuated with her’: My brother had a drinking problem and took his own life. He left $6 million to his former girlfriend who used to buy him alcohol
• She had a will, but it was null and void’: My friend and her sister are fighting over their mother’s life-insurance policy and bank account. Who should win out?

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